Is The Climate Changing For Gold?

At one point, gold was on top of the world. While the market declined due to economic conditions in 2008 and 2009, investors were looking for ways to keep their money safe. One of the best ways to do so is to look into safe haven investments, of which, gold is one of the strongest! After the economic recession that struck the world, gold's value climbed until 2011, where it peaked at $1837.68 per ounce. However, since then, gold has struggled. Nonetheless, it seems as though we're likely to see a shift in the tides yet again. Today, we'll talk about why gold has struggled over the past 5 years and what's happening that's causing the precious metal to start glimmering yet again.

Why Gold Has Struggled

As mentioned above, gold reached incredible highs in 2011 as the market continued to struggle to recover. However, since then, we've seen drastic declines on the commodity. So, what is it that has driven the value of gold downward? Well, gold is a very interesting commodity. Like most other commodities, the price of the precious metal is heavily dependent on the law of supply and demand. When supply is high and demand is low, the value of gold declines. Adversely, when supply is low and demand is high, the value of the commodity tends to grow. However, there is one unique aspect to think about here. The bottom line is that gold is a safe haven. So, when market conditions are poor, the value of gold increases as investors look for ways to keep their money safe. With that in mind, the market finally started to see consistent growth in late 2011. As a result, investors no longer had a reason to look for safe havens, and the value of gold fell as demand dwindled.

Why I Believe That The Tides Are Changing Yet Again

It's important to keep the safe haven qualities of gold in mind here. Thinking of what a safe haven does, take a look at what's going on in the market. Since the first trading day of the year, global markets have been on the decline. No matter where you look, chances are that if you're looking at the market, you're looking at a sea of red! In this particular case, I'm not expecting for this to be a short-term trend. Unfortunately, I believe that the world is entering into bearish territory. In fact, conditions around the world are eerily similar to what we saw before the 2008 and 2009 global economic crisis. Just take a look...

• Global Economy – The global economy is in shambles! Europe, Japan, China, and several other key economies are on the brink of disaster. While they have all made monetary policy changes in an attempt to ease the pain, the changes haven't done much. These economies are still struggling and will likely to continue to struggle for quite some time.
• Oil – Oil is a very important commodity with regard to overall market conditions. In late 2014, the global supply glut of oil caused the commodity's value to decline dramatically. Since then, we've seen a continuation of these declines. The truth is that oil is the deciding factor with regard to strength in the energy sector, and the energy sector plays a massive role in the overall market. Unfortunately, oil doesn't seem to be heading up any time soon, so, we can expect to see further resistance in the market as a result.

These two issues are the driving force behind the current declines we're seeing in the market. Considering the fact that these issues aren't likely to go away overnight, I'm not expecting to see a recovery any time soon. As a result, I'm expecting to see a continuation of the gains we've seen in gold recently as investors continue to run toward safe havens!

What Do You Think?

Where do you think gold is headed moving forward? Let us know your opinion in the comments below!